[ET Net News Agency, 12 November 2020] BofA Global Research cut its target price for
Uni-President China (UPC) (00220) to HK$8.7 from HK$98.3 and reiterated its "neutral"
rating.
The research house said UPC's better-than-expected net profit growth in 3Q was owing to
the recovery of the beverage business (turning positive in 3Q) and double-digit decline of
SG&A spending.
However, its overall low single-digit sales growth in 3Q trailed BofA's expectation and
its major competitor. Despite the momentum of noodle premiumization and self-heating
products, its mainstream noodles saw a decline in 3Q, and beverage recovery was also
slower than expected mainly due to the softness of juice and water.
BofA noted, historically, UPC's highly volatile quarterly earnings have been less
indicative of underlying trends, and this time earnings growth without solid revenue also
raises concerns on sustainability. It lifted its 2020 EPS forecasts by 10% but largely
maintained 2021 EPS forecast. (KL)